LivingSocial lays off 10 percent of its employees

LivingSocial says its customer service staff will move from DC to AZ, too.

Amazon has a minority stake in deals site LivingSocial—but it's large enough that it prominently contributed to Amazon’s disappointing financial earnings last month. LivingSocial, of course, competes with Groupon and other similar ventures that are also struggling. So on Thursday, costs began to get cut as LivingSocial announced it's laying off 400 employees—around 10 percent of its total workforce.

Spokesperson Andrew Weinstein told CNNMoney the company would be moving the bulk of its customer service staff from Washington, D.C. to Tucson, AZ and that its sales and editorial teams have been “streamlined.”

"We've gone through two years of hypergrowth, from roughly 450 employees to 4,500," Weinstein added. "The space has gone through such growth that we needed to catch our breath."

Even Andrew Mason, the co-founder of Groupon, reaffirmed confidence that even his company and in his leadership a day before this news broke.

"If I ever thought I wasn't the right guy for the job, I'd be the first person to fire myself," Mason told an audience at a Business Insider conference on Wednesday, according to USA Today.

Promoted Comments

I really can't see the whole online social coupon industry as anything more than a fad that peaked months ago, and is now starting into its death spasms.

My customer perspective is only anecdotal, but everyone that I know who has signed up for these deal sites have all either unsubscribed entirely, or very rarely buy a "deal", since they've experienced one too many cases where they forgot about a deal until after it expired, or they couldn't use a deal because the small business that they bought it from was overwhelmed with the traffic.

My business perspective is more substantial. My company (which is by no means a small business) teamed up with Google when it launched its deals program, and we saw minimal to no increased traffic beyond the surge in deal claims. There was no increase in return customers, and we've never even considered doing a similar deal, as there are tons of better ways to attract new customers and get them to stay with us.

From the small business side, I've seen plenty of reports saying that the deals are almost always universally negative for them in the long run. They may get hundreds if not thousands of takers on their deal, but most can't handle the excess demand. This pisses off existing customers who can't get service, and pissed off the new customers who think the lousy service is typical of that company. So the companies end up losing more traffic in the long run, and the temporary massive influx of traffic doesn't help either, since it's usually such a good deal that they get zero profit from it.

So you've got customers who don't want to use the service because it's too much of a hassle to keep track of the deals they've bought or try to redeem them, and you've got businesses that don't want to use the service because it doesn't make any financial sense to do so. And then you've got the deal companies themselves who went on massive hiring sprees the last couple years who are now holding the proverbial bags. It's the dot com bust all over again on a localized scale.

I really can't see the whole online social coupon industry as anything more than a fad that peaked months ago, and is now starting into its death spasms.

My customer perspective is only anecdotal, but everyone that I know who has signed up for these deal sites have all either unsubscribed entirely, or very rarely buy a "deal", since they've experienced one too many cases where they forgot about a deal until after it expired, or they couldn't use a deal because the small business that they bought it from was overwhelmed with the traffic.

My business perspective is more substantial. My company (which is by no means a small business) teamed up with Google when it launched its deals program, and we saw minimal to no increased traffic beyond the surge in deal claims. There was no increase in return customers, and we've never even considered doing a similar deal, as there are tons of better ways to attract new customers and get them to stay with us.

From the small business side, I've seen plenty of reports saying that the deals are almost always universally negative for them in the long run. They may get hundreds if not thousands of takers on their deal, but most can't handle the excess demand. This pisses off existing customers who can't get service, and pissed off the new customers who think the lousy service is typical of that company. So the companies end up losing more traffic in the long run, and the temporary massive influx of traffic doesn't help either, since it's usually such a good deal that they get zero profit from it.

So you've got customers who don't want to use the service because it's too much of a hassle to keep track of the deals they've bought or try to redeem them, and you've got businesses that don't want to use the service because it doesn't make any financial sense to do so. And then you've got the deal companies themselves who went on massive hiring sprees the last couple years who are now holding the proverbial bags. It's the dot com bust all over again on a localized scale.

LivingSocial isn't an Amazon subsidiary, Amazon simply invested some money and become a minority stake holder.

Yes, LivingSocial isn't an amazon subsidiary. They invested and have some cross promotions where amazon has something similar to LivingSocial at http://local.amazon.com and some deals on Amazon Local are from LivingSocial and some are unique to Amazon Local.

I really can't see the whole online social coupon industry as anything more than a fad that peaked months ago, and is now starting into its death spasms.

Google and Facebook both tried to have there own social coupon sites that failed and they closed them down with a year. I think Google is giving it another try but that says something to me if both those companies couldn't make it work. Well, especially Google.

LivingSocial isn't an Amazon subsidiary, Amazon simply invested some money and become a minority stake holder.

Yes, LivingSocial isn't an amazon subsidiary. They invested and have some cross promotions where amazon has something similar to LivingSocial at http://local.amazon.com and some deals on Amazon Local are from LivingSocial and some are unique to Amazon Local.

This right here. I was pretty suprised to read it was an Amazon subsidiary. Because its not.

I believe the high head count is because these coupon sites have to cold call for customers, that is it is a boiler room operation.

It is far to easy for a store to distrubute their own coupons, so Living Social and Groupon are all about poaching customers. It is all rather sleazy.

Not sure about the poaching angle, but it's true that there's a large sales force (apparently) required to get the businesses on board, and that kills the profits in the daily deals biz. Groupon is having a lot of trouble getting profitable as well. Which is kinda crazy, considering they're selling something that costs them nothing, and they make 50% margin on it.

Andrew Mason (if that is his real name) should have sold to Google when he had the chance.

I believe the high head count is because these coupon sites have to cold call for customers, that is it is a boiler room operation.

It's that, and the fact that they have opened up a large number of local offices to reach out to the small businesses that make up so much of their market. You get those local deals because they have dozens of field offices working directly with the local restaurants or B&Bs or salons. I think that's the number one reason why their head count ballooned so much so quickly. But good luck trying to do enough reductions to be both profitable yet still have enough functioning local offices to not go into cascade failure. Especially when my guess is that all these deals sites are hemorrhaging members who frequently buy the deals.

Building a customer service operation in DC was just foolish. You never put such an operation in a high cost of living area. It's almost all expense, no revenue. It's why Hagerstown, MD has two (First Data and Citigroup). Cheaper labor costs due to lower cost of living.

Building a customer service operation in DC was just foolish. You never put such an operation in a high cost of living area. It's almost all expense, no revenue. It's why Hagerstown, MD has two (First Data and Citigroup). Cheaper labor costs due to lower cost of living.

"We've gone through two years of hypergrowth, from roughly 450 employees to 4,500," Weinstein added. "The space has gone through such growth that we needed to catch our breath."

I just can't stomach this sort of corporate-speak bull crap. What does that even mean? Basically, management either misjudged the market and they didn't need those 450 people or they hired them knowing they'd be laying off people. "Catch your breath"? So, management is not actively managing the company, they're finished with the race and are just warming down. Seriously? Maybe executive management should have been among the 450, if for no other reason than this absolutely idiotic corporate statement.